Good day, everyone, and welcome to the Itron Incorporated Third quarter 2021 Earnings Conference Call. Today's call is being recorded. For opening remarks, I would like to turn the call over to Ken Gianella. Please go ahead. Thank you, operator. Good morning, and welcome to Itron's Third Quarter 2021 Earnings Conference Call. We issued a press release earlier today announcing our results. The press release includes replay information about today's call. A presentation to accompany our remarks on this call is also available through the webcast and on our corporate website under the Investor Relations tab. On the call today, we have Tom Deitrich, Itron's President and Chief Executive Officer, and Joan Hooper, Senior Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call to take questions using the process the operator described. Before I turn the call over to Tom, please let me remind you of our non-GAAP financial presentation and our safe harbor statement. Our earnings release and financial presentation include non-GAAP financial information that we believe enhances the overall understanding of our current and future performance. Reconciliations of differences between GAAP and non-GAAP financial measures are available in our earnings release and on our investor relations website. We will be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from these expectations because of factors that were presented in today's earnings release and the comments made during this conference call and in the Risk Factors section of our Form 10-K and other reports and filings with the Securities and Exchange Commission. In addition, due to the fluid nature of COVID-19 pandemic, company estimates regarding the impact of COVID-19 on current or forward-looking statements are made in a good faith attempt to provide appropriate insight to our current and future operating and financial environment. Materials discussed today, November 4th, 2021, may materially change, and we do not undertake any duty to update any of our forward-looking statements. Now please turn to page four in the presentation, and I'll turn the call over to our CEO, Tom Deitrich. Thank you, Ken. Good morning, everyone, and thank you for joining us. I will start the call today by updating you on some significant actions we have taken since our Investor Day on October 5th. First, we're pleased to announce the acquisition of SELC, a leader in smart lighting controls. This acquisition extends our smart city platform to an end-to-end solution, including the Riva network management platform, and now lighting controls. SELC has been a long-standing Itron partner for numerous marquee smart city deployments around the globe. With Itron and SELC combined, we will deliver more innovative solutions to our customers for many years to come. Yesterday, we were pleased to announce that we signed the definitive agreement with Dresser Utility Solutions to sell our European commercial and industrial mechanical gas meter business, our gas station meter and pressure regulation business, and our global gas regulator business. This arrangement includes two manufacturing facilities in Western Europe. This transaction has benefits for our customers, our shareholders, and our employees. Dresser Utility Solutions, a veteran industry player in the gas utility industry, has acquired a strong set of assets combined with a seasoned operational team. This deal is contingent upon local works council approvals with an anticipated close date in the first half of 2022. It is important to point out that Itron is not exiting the gas utility vertical. Itron's focus is on higher value solutions in networks and outcomes, such as the Intelis gas static meter platform with integrated communications and safety features. This transaction is fully aligned with our asset-light manufacturing and overall company strategies. In conjunction with this transaction, we also announced a restructuring project. You will hear more details from Joan in a moment, but the focus of this restructuring project is to drive overhead reductions in certain locations and support areas. These actions are part of our ongoing efforts to ensure Itron is stronger and more nimble as we outlined at our recent Investor Day. Now please turn to slide five as I hand over to Joan to review our third quarter results. Thank you, Tom. At a high level, our Q3 results were negatively impacted by continued global component constraints. These constraints, in particular semiconductors, reduced our ability to meet the recovering customer demand and also resulted in higher input costs. Third quarter revenue of $487 million decreased 10% versus last year. The year-over-year decline was due to the continued component constraints, limiting our ability to meet customer demand. We estimate that the component shortage reduced Q3 revenue by approximately $100 million. The majority of this was in the Networked Solutions segment, but it also impacted the Device Solutions segment. Gross margin for the quarter was 27.7%, 120 basis points higher than last year, primarily due to favorable product mix. This was partially offset by higher supply chain costs and manufacturing inefficiencies. The GAAP net loss of $2 million or -$0.04 per diluted share compared with a net loss of $25 million or -$0.63 per diluted share in the prior year. The year-over-year improvement was primarily driven by lower restructuring and interest expenses, partially offset by a higher tax rate. Regarding non-GAAP metrics on Slide six, non-GAAP operating income was $16 million. Adjusted EBITDA was $26 million or 5% of revenue. Non-GAAP net income for the quarter was $9 million or $0.21 per diluted share. Looking at the revenue by business segment on Slide seven, Device Solutions revenue was $152 million, a $26 million or 15% year-over-year decrease on a constant currency basis. The decline was primarily due to the impact of component constraints limiting our ability to meet the customer demand. Networked Solutions' revenue was $274 million, a $33 million or 11% decline in constant currency. This segment had the most significant impact from the component constraints. Revenue in the Outcomes segment was $60 million, a $2 million or 4% year-over-year increase in constant currency. The increase was driven by higher product sales and software licensing. Lastly, foreign currency changes resulted in $4 million higher revenue versus the prior year. Moving to the non-GAAP year-over-year EPS bridge on Slide eight. Our Q3 non-GAAP EPS was $0.21 per diluted share, down $0.40 from the prior year. The drivers of the year-over-year changes were net operating performance, which had a -$0.46 Per share impact versus Q3 of 2020, primarily due to the lower revenue caused by component shortages. Lower interest expense resulted in a $0.32 Increase in EPS year-over-year. A higher non-GAAP tax rate decreased EPS by $0.24 versus Q3 of 2020. The higher tax rate was due to fewer favorable discrete benefits in the current quarter. Finally, changes in foreign currency and a higher share count resulted in a $0.02 per share decrease year-over-year. Turning to slides nine through 11, I'll discuss the Q3 results by business segment compared with the prior year. Device Solutions revenue was $152 million, with gross margin of 15% and operating margin of 8%. Gross margin increased 310 basis points year-over-year due to favorable product mix and reduced inefficiencies related to COVID-19. Operating margin increased 160 basis points due to the fall through of higher gross margin, partially offset by higher operating expenses. Networked Solutions revenue was $274 million, with gross margin of 33% and operating margin of 22%. Gross margin decreased 60 basis points year-over-year due to inefficiencies related to the component constraints, partially offset by a favorable product mix. Operating margin decreased 100 basis points year-over-year due to lower gross profit and continued R&D investment. Outcomes revenue was $60 million with gross margin of 37%. Gross margin increased 190 basis points year-over-year due to cost efficiencies. Operating margin was 20%, 140 basis points lower than last year due to an increase in R&D investment, partially offset by the flow-through of higher gross profit. Turning to slide 12, I'll cover liquidity, debt, and capital allocation. Free cash flow was $11 million in the third quarter versus $38 million a year ago. The change in cash flow was due to lower profitability and an increase in working capital usage. Cash and equivalents at the end of the third quarter were $189 million. During Q3, we repaid the remaining $31 million of our term loan. As a reminder, we also have $500 million in bank revolver capacity. Total gross debt was $460 million, and net debt was $271 million at the end of the third quarter. Net leverage was 1.6 times at the end of Q3 2021, compared to 4.3 times a year ago. On November first, our board of directors authorized a new share repurchase program of up to $100 million of Itron's common stock over the next eighteen months. As we said last quarter, we expect the component headwinds to continue through 2021 and into 2022. The Q3 revenue impact of the component constraints of approximately $100 million was worse than we anticipated. The full year revenue guidance provided on our last earnings call anticipated approximately $150 million-$200 million of full year component supply headwinds. We now expect that constraint could be as much as $250 million for all of 2021. Customer demand continues to show recovery, but given the component situation, we are now expecting the full year revenue to be below the range we provided on last quarter's call. Despite the top-line shortfall, we still expect to be within the range of the prior guidance for non-GAAP EPS. Once component constraints begin to ease, we believe we will recover the vast majority of this delayed revenue in future periods. Finally, as Tom mentioned at the start of the call, we continue to focus on executing our strategy with the acquisition of SELC, the sale of our European Mechanical Gas and Global Regulator business, and a restructuring project. The restructuring project is focused on driving cost reductions in certain locations and functional areas. We estimate cash costs of approximately $60 million-$65 million, and the actions will drive annualized savings of approximately $15 million-$20 million. The project is expected to be substantially complete by the end of 2024. While we continue to navigate through the near-term headwinds associated with component constraints, we remain confident in our long-term financial model that we shared with you at our recent Investor Day. Now I'll turn the call back to Tom. Thank you, Joan. Let me add some operational insights to the update Joan provided. While our third quarter was impacted by component constraints, our team is continuing to aggressively work with the executive leadership teams of semiconductor suppliers associated with critical bottlenecks to maximize our allocation and alternatives. We continue to work with customers to align project schedules as the vast majority of delayed revenue is not lost, but shifted into future periods. The current visibility for supply recovery is uncertain, but we expect these constraints to linger into 2022. Even as we face challenges with component supply, we continue to grow our Distributed Intelligence-capable endpoints to over 3.4 million cumulatively, expanding the footprint of our agile, multipurpose, multi-application network. We are also seeing customer success with the at-scale deployment of Distributed Intelligence edge computing. Tampa Electric Company recently deployed 600,000 apps across 200,000 endpoints on the same network running their day-to-day meter to cash operations. TECO is now able to obtain enhanced analytical insights. More importantly, TECO is acting upon those insights with targeted operational activities that drive improved reliability and safety. The expected benefits of DI are gratifying to see, but what is truly exciting are the new benefits that are being uncovered now. Our distributed intelligence platform is more than just a product, it's about the speed of innovation. For example, new applications are moving from concept to field operations in less than three months. This was unthinkable a few years ago. DI is a principal tool for the utility to enhance operations at rates of innovation that are new to our industry. Itron is the only provider in the industry to have this capability performing in the field today. Turning to slide 14. With solutions like distributed intelligence, we are seeing strong demand from our customer base. While it should be expected that quarterly bookings are lumpy, we are projecting a strong bookings year with a book-to-bill ratio of at least 1:1. Current backlog remains at $3.4 billion in total, with approximately $1.4 billion in our 12-month backlog, consistent with the improving demand for our solutions. We are encouraged by the bookings achieved so far this year and continue to see a robust pipeline of additional opportunities. A highlight of our third quarter bookings was a 10-year AMI extension signed with American Electric Power. The arrangement covers a broad geographical area across the Midwest into the Southwest portions of the United States. Our current deployment provides AMI services to approximately 2.4 million AEP customers and is growing to 4.5 million at completion. Interest and demand for our technology is high, and we expect it to continue to grow with the dynamic challenges facing the utility industry. It's an exciting time for us at Itron to be providing such value and capabilities to the utilities and cities we serve. As we close out today, we would like to thank everyone who participated in our recent Investor Day. Itron remains committed to our operating model and the targets we laid out at Investor Day. We will continue to drive long-term shareholder value by executing on the business, being proactive with our efforts to deliver an effective operating model, while continuing to ensure Itron remains a market leader. Thank you for joining today. Operator, please open the line for some questions. Thank you. If you wish to ask a question at this time, please signal by pressing star one. Please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. Our first question comes from Tommy Moll from Stephens. Please go ahead. Good morning, and thanks for taking my questions. Morning, Tommy. Wanted to start on the update you gave us regarding guidance. I'm curious. It sounds like revenue is expected to be below the prior range, but earnings per share is still within the prior range. The inference there would be margins better than you would have expected previously. I'm just curious what the driver is there. Is it a mix issue? Is it really low-margin revenue that's been pushed into next year? Or what would you point us to there? Yeah, I would say it's more a continuation of discretionary OpEx controls than it is margin. Got it. Just any context you could give us around what that is, Joan? In terms of what the controls are? Yes. Well, I mean, obviously, we have done very, very little travel since the onset of COVID. Initially, in some of our guidance, the expectation was Q3 and Q4 would pick up. It really hasn't picked up. We're looking at continuation of just, you know, not spending any dollar we don't need to. I would say a lot of it has to do with kind of T&E and things of that nature. Okay. That's helpful. Thank you. Following up from a strategic standpoint, you gave us some updates on a divestiture and a restructuring. Both of these topics have been top of mind for some time now and been part of your footprint reduction strategy. I'm curious, should we think of these two updates as mostly cleaning up what was left to be done, or are there more big initiatives we should expect in the future? Thank you. Sure, Tommy. This is Tom. I can take that one. I would encourage you to think about it very much as continuation of our stated strategy. We wanna make sure we are moving our portfolio towards communicating devices, networks, and outcomes. The assets that we moved out were primarily mechanical related devices, which didn't fit the strong long-term portfolio. Good assets, but don't really fit well for us. There are a couple of manufacturing facilities in Western Europe that go along with the deal at close, and that also is part of the strategy as we continue to move towards more asset light models to allow us to be a little bit more agile as demand would naturally ebb and flow. The last piece of this is really the focus on sustainability and where we spend our R&D dollars towards things that are up the pyramid. That's really what is behind it. We'll be down to about five manufacturing facilities in Europe after this deal were to close. Certainly we'll continue to look at ways we can continue to shape our portfolio aligned with our strategy. This is a really good step for us. I think Dresser Utility Solutions got a really good set of assets to go along with the deal as well. Thanks, Tom. I appreciate the insight, and I'll turn it back. We'll now take our next question from Ben Kallo from Baird. Please go ahead. Hey, thank you guys so much for taking my questions. You know, on the acquisition, could you talk a little bit about how this, Tom, how it fills in your portfolio and where you stand, you know, with you know, being aggressive or other things to do in the portfolio? Then I'll follow up. Sure. Good morning, Ben. The way to think about it is, we've had a streetlight offering for smart cities for some time. The offering that was, I'll say, native to Itron in a legacy sense was the Riva network and all of the management software, the SaaS that goes along with the overall solution. We had been working with SELC for the actual lighting controller. That's the piece that we added into the portfolio. It gives us an opportunity to continue to integrate on the hardware side of things to create better and more innovative solutions. This total solution really is about making sure that we have a good vertical application to go into a smart city to be, I'll call it, the anchor tenant for that Riva network. Switching out legacy luminaires towards LED lighting is a good operating cost savings for the city, and they can therefore invest in a Riva network, which allows them to monetize that network capability with many other solutions going forward. Once you've built the base Riva to control the lights, you now have the ability to do smart parking, to do town signage. You can do safety. You can do pollution types of applications. There's a lot of different things you can layer on top of that. Now that we have the full solution end-to-end on our side, it opens up the possibility for us to bring more of those solutions to the market a bit faster. That's really what was behind the acquisition and why we added it into the portfolio. Relative to your larger question, what are we still thinking about? Clearly, our strategy has not changed. We want to advance in the Outcomes space. We'll continue to think about ways we can enhance our portfolio in that area in the months and quarters ahead. I'm sure you saw the Ecobee acquisition. You know, everyone's talking about more going into the home and, you know, and. Should we think about you guys, you know, staying out more to, you know, smart cities and software, you know, for utilities and versus trying to go into, you know, do something like that? Thank you. Sure, Ben. I would think that our home turf, if you will, from a market opportunity, is more of a B2B kind of scenario rather than a business to consumer marketing model. That really isn't the sales channel we're interested in. That said, I think that the newest version of the meters that we sell, the endpoints that are available, do enable partnerships with other companies for the inside the home kind of assets. We do have an ability for the meter to communicate with other devices inside of the house for efficiency programs, for availability of data to help the consumer understand how he or she is using a particular service or how their energy or water is being used to give them better control and insight. That's something that we generally do in partnership with our customers, and it's a model that serves us well. Thank you. We will now take our next question from Jeff Osborne from Cowen and Company. Please go ahead. Yeah, good morning, guys. Just a couple quick questions on the semiconductor issue. I was wondering on the $100 million impact, is there any, you know, risk to either market share losses or, you know, fines, for lack of a better word, from your customers? Any sort of repercussions of the failure to deliver? The revenue that we did not fulfill in the third quarter, the vast majority of that rolls into future periods. Our customers are working with us to work through the scheduling of that as components become available. I would note that we have not seen cancellations in programs. We do not see any significant market share loss or anything of the sort. In general, our customers tend to work over longer time horizons and not just a quarter-to-quarter deal. It's kind of the blessing of having those long-term relationships and long-term contracts with customers. I don't think that there's a market share or a particular penalty risk here. Clearly, our customers want to get the product deployed and so do we. Hence we work closely with the semiconductor manufacturers to find alternatives, maximize our allocation, and make sure we're moving product through our supply chain as quickly as we can to fulfill the demand. Makes sense, Tom. That's what I thought was the case. Just wanted to double-check. Then two other quick ones, one maybe for Joan on the buyback. Does that suggest that, you know, M&A is less of a priority in 2022, just given where current valuation is? Then, you know, maybe for you, Tom, just quickly on 2022 and your sort of crystal ball around RFI and RFQ activity. Do you anticipate another robust year in 2022 just based on what you're seeing now or are things a bit more moderate, you know, coming out of COVID? Let me start with the first one. I would say no, it does not really reflect any concerns on our part on the M&A possibility, particularly in Outcomes. We just think it's prudent to have that lever in our toolkit from a capital allocation standpoint. Historically, Itron has typically always had a share authorization out there, so nothing specific to read into that. Tom, you wanna talk about RFQ? Sure. We definitely have good confidence in our business over the long term. Our RFP, RFQ, whatever letter you want to use, the pipeline of opportunities in front of us is very robust, very rich, and we expect that to continue on. Our customers definitely are faced with a lot of challenges relative to how to integrate renewables into their solutions, how they can deal with increasing levels of natural disasters, climate disruption, things of that sort, as well as how they can engage more closely with their consumers. You put those things together, it drives some real demand for our technology and our portfolio. We think that the robust environment that we see in terms of customer activity is likely to continue. Perfect, Tom. That's all I had. Thanks so much. Sure. Our next question comes from Chip Moore from EF Hutton. Please go ahead. Morning, everyone. Thanks for taking the question. Morning, Chip. Great to speak with you. Thanks. Wanted to talk about bookings just being a little softer this quarter, but obviously still right well above 1-to-1 year to date. Just wondering if you're seeing any changes on the demand side. Doesn't sound like it, but just particularly as it relates to any pausing ahead of federal funding or anything like that, if that could be causing any customers to think about those type of dynamics. Good question, Chip. I don't see any change in customer behaviors. Yes, bookings tend to ebb and flow a bit quarter to quarter. I wouldn't look at any one quarter as any sort of signal that something has changed in the marketplace. Year to date, we're even including a bit slower third quarter in terms of things coming into the backlog. We're 1.12 - 1 in terms of the book to bill and very robust opportunities in front of us for Q4. No change in the marketplace. Relative to government stimulus or infrastructure spending around the world or in the U.S., clearly that could be a benefit. It's not something that we're waiting for or basing our business around. We've got a robust pipeline of opportunities. We don't see customers changing their behavior in the short run leading up to or any potential infrastructure spending. So no change. And in this particular case, that's a very good thing given that it's been pretty robust for the last several quarters, and we would expect that to continue. Right. Right. Okay. Maybe a follow-up on the sale of the gas device assets. I think you called out that, you know, in no way signals less importance for gas markets in general. Just curious if you could expand on what you're seeing in gas and water, both markets. Thanks, guys. Sure. Very important point that you made there. We're not walking away from the gas market at all. We continue to have a robust portfolio of communication devices as well as things like the Intelis gas metering platform, which is a static meter with integrated comms and integrated safety features built into that. That is a robust value-added portfolio of products, which fits our strategy. It goes into that whole notion of networks and then services that live on top of it with things like methane sensing and automatic alarms for triggering to avoid safety incidents, things of that sort. The part of the portfolio that we did divest, good assets, for sure, but don't really fit our longer-term strategy as they are non-communicating and really more device-oriented in how they are used by our customers. Good interest on the part of customers for both gas and water products. Coming to the second part of your question, gas customers clearly are interested in safety as well as automating their business processes, so communications become more important. Methane sensing and being able to use a Riva network becomes more and more important. We definitely see customers more willing to work together to reuse a common asset. More combo deals between electricity plus gas, for example, comes to fruition. On the water side of things, water sustainability is obviously very important, and that same trend about automating business processes, wanting to get better value out of the data and run their business in a more automated fashion is what we see in the water market as well. Both robust parts of our portfolio, you'll see us continue on, but very much aligned to the overall strategic direction of the company. Got it. Appreciate the color. Thanks, Tom. The next question comes from Connor Lynagh from Morgan Stanley. Yes, thank you. Just a question. I appreciate the supply chain situation is very dynamic right now. I'm curious, we heard from some of your competitors that there's actually been a decrease in visibility from semiconductor supply in terms of losing, you know, planned timelines from suppliers. Just curious, you know, have things gotten better, worse over the past few months here? Are you starting to get visibility on where things might get maybe back to normal, it's too strong a term, but to a stable level that you can sort of build from? In terms of the supply that we actually brought into the third quarter and were able to turn into revenue and get to our customers was indeed a little worse than what we had anticipated, and that was reflected in Joan's comments. That said, in terms of the overall visibility and things that are going on in the supply chain, I'll be honest, I don't see it as yet better than what we talked about previously. Some of the risks that I highlighted in our prior call, things like shutdowns of various economies in Southeast Asia when countries like Vietnam or Malaysia or the Philippines has to go on lockdown as they work to contain COVID-19, that puts some bumps into the earlier stages of a semiconductor cycle or even in the assembly and test side of things. What we saw in terms of the near term was that was playing through in terms of deliveries in Q3. That was where exactly the things that we talked about back in the second quarter. I don't see it as particularly better or worse from what we were expecting overall. I think that the environment as you pointed out is extremely dynamic. There is a lot of uncertainty in terms of how quickly things can get back to normal. What we really do need to watch for is lead time starting to stabilize and to contract again, and that'll play through in the months and quarters ahead. Last point I would make is we do think this will linger on into 2022, which is what I said in some of our pre-prepared comments earlier on in the discussion. Again, consistent with what we signaled back in Q2, but it's still the same environment we see today. Yeah, appreciate that. So just to dial in a little bit, I think you gave some context on this, but the revenue shortfall that you guys have been discussing sounds like it's mostly moving into 2022 or beyond. Should we think of that as basically entirely or at least the vast majority in the Networked Solutions business? Basically the question is, you know, how do we think about the margin on that? Is it going to come through with normal margins? Is there any sort of, you know, penalties or just higher input costs we need to think about as that revenue does manifest? Yeah, let me take a stab at that. I would say, you know, approximately 75% or so of the component impact hits the network segment. As Tom indicated, that really isn't lost, it's delayed. Whether it's 2022 or beyond really is a function of Tom's earlier answer, which is when does the environment stabilize, et cetera. We are watching the environment closely for input costs. I mentioned in my prepared remarks, that we did see higher input costs this quarter to the tune of approximately $10 million. We're going to have to manage that as well. Obviously, networks margins are higher than devices as an example. When that revenue comes back, it's certainly from a standpoint of the overall portfolio is higher margin stuff, but we'll have to manage the input cost side very carefully. All right. Thanks for the color. I'll turn it back. Now our next question comes from Noah Kaye from Oppenheimer. Please go ahead. Thanks so much for taking the questions. I guess first one, just on the contracting and booking environment. Can you comment a little bit on how you're seeing the market right now? Obviously, you've talked about kind of the robust demand. You know, just not sure if there's any implications for you know, the scope of projects or the tenor of projects given you know, the legislation that's out there, you know, some of the industry-wide supply chain headwinds. Just trying to understand, you know, how the cadence and scope of contracting discussions is trending right now. Sure. I can jump in on that one. I think that the customers are clearly driven by some of those big trends that I talked about. Looking to automate their business process, being able to deal with renewables, with climate disruption, with engaging more closely with their consumers. All of that drives more technology and more digitalization in their overall infrastructure. Those are the underlying trends that drive customer behavior and the pandemic in some ways, while it certainly puts some volatility into exact timing of things as we talked about back in 2020. In some ways, it is a longer-term catalyst as our customers definitely see the need to automate their business and deploy the kind of technology that we provide. I don't see customers hesitating or waiting based on any potential infrastructure spending. I don't see them any longer slowing things down in terms of the regulatory process. Things are starting to normalize on that side. Obviously, the time from contracting to actual starting a project does vary a little bit depending on the individual project at hand. Now we'll have to watch component availability as things start to come back into focus in 2022 and beyond. Overall, I see it as a very robust demand environment, the underlying trends are there and strong, and people aren't slowing down or waiting for infrastructure spending. It clearly could be a tailwind when and if it would come, but not something we're counting on or requiring for us to hit the models that we've been talking about. Okay. Good. Thanks, Tom. Then, you know, in the context of the optimization targets and real division you shared at Investor Day for, you know, continuing to make the business more asset light, can you kind of frame how much this divestiture, these planned divestitures get you to that goal? I think the easiest way to think about it, and this is a gross oversimplification, a little bit, is we're taking out two factories that were associated with the products that we're talking about here. We're down to five factories in Europe, Asia, and the Americas are already kind of in the optimized state, more or less that we would expect. Still, portfolio work that we can continue to look at with our devices business. We really have come a good step forward, and we'll continue to look for opportunities. I think our minds turned a bit more towards growth on the Outcomes side of things, and that's an area that we're continuing to look at. All right. Very helpful. Thank you. Our next question comes from Pearce Hammond from Piper Sandler. Please go ahead. Yeah, good morning, and thank you for taking my questions. My first question is, what specifically drove the backlog decline quarter to quarter? Yeah. It's basically flat, you know, down very, very slightly, but it's normal variation. I would say that the way to think about it is that there weren't a lot of new big projects that they came in, just the normal timing of customers signing contracts and achieving regulatory approval. I would remind everyone that we don't put something into backlog until you've got regulatory approval, and that tends to happen at discrete moments in time. It's really you know, we consume some of the backlog, no big projects came in, and that's what led to the flat and slightly down kind of numbers that you saw. The 12-month backlog is again, really ever so fractionally up. It rounds to more or less the same number from a view that you tend to see total backlog rounded down a little bit. I wouldn't look at it as something that is a signal. The customer activity remains robust and we've got a great outline for opportunities ahead, and the backlog is still at near record levels. Okay, thank you. Just following up on Joan's prepared remarks earlier. Essentially, this revenue that you've lost in the quarter pushes out and to the right. Essentially, is it fair to say that the component shortages are kind of equally impacting your competitors so that you're not necessarily losing sales, it's just changing the timing of when the sales occur? Yeah, that's basically true. As I mentioned, about 75% of the impact is in our network segment, and those are longer term contracts and committed business. We're working closely with the customers as to when we'll have the components to be able to fulfill the demand. In general, your comment is correct. Thank you. Thank you. As a reminder, to ask a question, please signal by pressing star one. Our next question comes from Michael McGinn from Wells Fargo. Please go ahead. Hey. Hey, good morning, everybody. Aside from earnings, it was interesting to get some channel checks done recently as our city upgrades to high pressure gas, and I have some new Itron equipment in the basement now. Appreciate that. Great to hear. I was looking to get a little more color on kind of the free cash flow build into the out years. It seems like the component shortages are limited to a narrow scope of bill of materials. As the log jam starts to break here and you get back to growth, any color on what you think free cash flow conversion would look like, you know, if your inventory build is only isolated to a few items and kind of, you know, how that compares to your other growth periods? Yeah. The only thing I would probably offer is if you look at the information in the target model we put out in Investor Day a couple weeks ago, we showed 2024 targets, including cash flow at a range of 8%-10% of revenue. That's quite a bit higher than it has been, and that's probably the best color I can give you in terms of a normalized model going forward. Okay. Then on the smart lighting side, it seems like a lot of the OEMs are passing around these assets. I'm just curious, GE has some interesting history in the utility space as well. Now that they have this, you know, full suite of C&I and resi kind of exposure, you know, what do you see that kind of matches their investment profile in lighting, you know, in terms of the smart lighting, the value add relative to the legacy historically and where we are in kind of the adoption cycle? Any color there would be great. I would say that our solution is pretty unique in the marketplace, given that we've got end-to-end capability from the Riva network, the management, and the SaaS components, as well as the lighting controller. That is a bit unique. You've seen companies make moves that own luminaire plus the lighting controller, in cases like that, there's a bit of consolidation in other parts of the world relative to lighting control piece of it. But really having that Riva network, which is a broader smart city offering, we don't look at this as something that's unique to lighting. It's much more about a broader smart city play. We wanna bring the same ability to have a very agile network in those types of environments to enable cities to really be attractive places to live and enable it overall. I wouldn't look at it as something that is a lighting thing, particularly. It's more about the network and the overall smart city play. Lighting happens to be an application inside of that for us. Got it. I appreciate the time. Thank you. As there are no further questions in the queue, that concludes today's question and answer session. Now I would like to hand the call back over to Tom Deitrich for any additional or closing remarks. Very good. I thank everyone for joining us today, and we look forward to talking to all of you again soon. Thanks much. Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.